USD/JPY – Yen Edges Lower Ahead of G20

The Japanese yen has edged lower in Thursday trading, as USD/JPY trades in the mid-98 range in the European session. The markets will be keeping a close eye on the G20 meeting in Washington, as finance ministers and central bankers from the world’s major economies gather for two days. There was some good news out of Japan on Wednesday, as the trade deficit narrowed from JPY1.09 billion to JPY0.92 billion. This matched the market forecast. On Thursday, the US will try to tame an awful streak of weak data, with the release of Unemployment Claims and the Philly Fed Manufacturing Index. There are no Japanese releases on Thursday.

The G20 meets on Thursday in Washington, and the slumping yen will be high on the agenda. Japan’s trading partners are very unhappy about Japan’s monetary actions, which has helped make the yen much more competitive and put a dent in their exports in the process. However, the Japanese government has deflected the criticism and continues to move full steam ahead with aggressive easing steps, which it says are aimed at stamping out deflation, not manipulating the value of the yen. The yen has now slid 15% against the US dollar in 2013, and last week came very close to the psychologically significant 100 level. G20 meetings often sugar coat any criticism aimed at one of their own members, but any statements about the high value of the yen could nonetheless affect the movement of USD/JPY.

In the US, the picture is not a pretty one, as a long streak of weak economic numbers, dating back to March, continues. Building Permits dropped from 0.95 million to 0.90 million, missing the forecast of 0.94 million. Core CPI posted a weak gain of 0.1%, falling below the estimate of 0.2%. There was better news from US Housing Starts, which hit a multi-year high, improving to 1.04 million. The estimate stood at 0.93 million. The weak data points to trouble in the US economy, and if the streak continues, is bound to raise red flags in the markets about the extent of the US recovery. The markets will be hoping for better news on Thursday, as the US releases more key numbers.

Earlier this week, the IMF released a report on global growth, and the numbers were mostly negative. The IMF downgraded its 2013 forecast for global growth from 3.5% to 3.3%, and lowered the 2014 prediction from 4.1% to 4.0%. There was some good news for Japan, as the IMF raised its forecast, from 1.2% to 1.6%. The report said that the Bank of Japan’s aggressive monetary steps would increase growth and combat deflation. However, the IMF did note its concern over Japan’s huge debt load, which continues to weigh on the economy.

USD/JPY for Thursday, April 18, 2013

 USD/JPY 97.63 H: 98.52 L: 976.63

USD/JPY Technical

USD/JPY continues to move higher in the Wednesday session, with the proximate resistance and support levels remain intact (R1 and S1 above). The pair is facing resistance at 98.45. This is followed by resistance at 99.57, which is protecting the 100 level. On the downside, 97.24 continues to provide support. It is followed by a support level at 96.03.

• Current range: 97.24 to 98.45

Further levels in both directions:

• Below: 97.24, 96.03, 95.27 and 94.59
• Above: 98.45, 99.57, 100, 100.54 and 101.81

OANDA’s Open Position Ratios

USD/JPY is showing movement in the direction of short positions. This activity is not reflected in the current trend of the pair, as the dollar has posted gains against the yen. The activity in the ratio could be a sign that the pair may undergo a correction and reverse direction. The ratio is still dominated by long positions.

The yen is again under pressure, as USD/JPY climbs higher. Will we see the pair test the 99 level. We could see some activity from the pair  later on Thursday, as the US releases key employment and manufacturing numbers.

USD/JPY Fundamentals

• 12:30 US Unemployment Claims. Estimate 349K
• 14:00 US Philly Fed Manufacturing Index. Estimate 2.7 points
• 14:00 US CB Leading Index. Estimate 0.1%
• 14:30 US Natural Gas Storage. Estimate 35B
• Day 1: G20 Meetings
• 16:00 US FOMC Member Sarah Bloom Raskin Speaks

*Key releases are highlighted in bold

*All release times are GMT

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